What license and insurance documentation do I need to verify when hiring a tradesman?

Question

I am new to rehabbing and haven't done any yet, but before I do my first single family home I would like to understand licenses and insurance better. Assume I want to rely on the hired help to manage as much of the construction as possible because I have a full time job and will only be checking on the project a few times per week. I will not have the time to manage multiple contractors.

When would I want to hire a licensed General Contractor versus a tradesman/handyman? A tradesman I talked with (whom is a trusted friend of mine I would love to hire) said he can do most any kind of work but when a licensed GC is needed, the tradesman brings on the GC as needed. But what licensing and insurance should I require from the tradesman? Is he legitimate?

And how does "permits" come into play here? I've heard that cities and utilities will generally work with only licensed contractors. Does that mean a plumber needs to have a plumber license, electrician electrician license, and so on? But that a GC can pull a permit for all of the above? I'm just not grasping the concept.

Another friend of mine said you need to pull a permit any time there is major work. For example, load bearing wall changes, major plumbing (outside the home), major electrical (from panel to service drop), and something basement additions. So as long as you aren't doing any work requiring a permit, you don't need a GC license. But I should still require a plumber's license for plumbing work, electrician license for electrician work, and so on so forth, right?

Can anyone help me understand?

William Hochstedler · Answer

Just to chime in, in Utah you must be an owner occupant (not just an owner) to be your own contractor.  In other words, you cannot general your own investment properties without a contractor license.  DOPL tried to explain the logic of this to me as they wrote the fine.  Also, some sort of trade license is required for just about everything except carpet and paint--whether it's enforced is a different story and very specific to your situation.

If you're going to do a lot of this, you definitely should develop relationships with contractors.  And be creative here, during the slow-down a lot of contractors let their licenses expire and have moved on to something else.  It's often a matter of money and paperwork to get them active again.  Also, your city has a public list of all the permits pulled.   Keep this list handy when you're out and about and watch for who's working with permits and who's not.  This information could be useful for a bunch of reasons.

Good luck.

Wm

Gary Parker · Answer

@Josiah Halverson starting one rehab ago I started pulling a permit for each job I do.  I have always hired licensed electricians, plumbers and roofers with or without a permit though.   Yes in my past life I didnt pull permits.  Since you are somewhat familiar with my Sandy rehab, let me tell you exactly what I will have to do there that requires a permit.  The roofer pulled his own permit for the roof.  The window people will pull their own permit for the window replacement.  The only new construction in this house is new kitchen and bath electrical circuits and new hard wired smoke alarms, moving washer hook ups-some cast iron replacing-new shower/tub valves and a new shower pan and frame two walls and add a door.   The first step is plans.  You will need to submit 2 sets of plans to the city and pull a permit.  I have an electrician who is also a GC so he draws my plans and applies for the permit.  Then I have my plumber pull a permit.  Most areas will want a licensed plumber and electrician.  Really not sure if a GC in Utah can do plumbing or electrical.

In Utah a handyman can be licensed and their work limit is $10,000.00.  This is not just their scope of work but the total job weather the handyman does the work or not.  So if the total job is over $10K a handyman should not be framing or anything that will be inspected.

Now right or wrong here is real life on the Sandy job.  I left for a 10 day vacation and have only had the roof permit pulled.  One is suppose to pull a permit before any work starts.  I am not going to hold the job up so as you know, demo has started and now done, framing starts tomorrow then plumbing and electrical.  A shower pan needs two inspections, the material that makes up the pan and the sand mix concrete that goes on top.  I will have the framing, plumbing, shower pan and electrical done when I get back, and I choose not to have the first shower pan inspection.  Ill pull the permit when I get back then get the inspections done.  Typically because I use licensed electrians and plumbers and the GC reviews the handyman's framing, there shouldn't be an issue.  There could be though.  If the city gets mad they can charge double permit fees and make me rip the shower pan apart.

The point I hope you see is that with 3 days a week you should be able to manage the job just fine.  Yes you will go nuts the first time, but you are a smart guy.  Sometimes it is easier to just go for it.  You should be able to pull a permit as an owner then hire licensed subs where required.  As far as insurance goes, each licensed sub needs to give you proof of liability and workers compensation insurance.  If you hire a GC don't assume he his getting the proper proof of insurance, see it for yourself.  Most every worker even licensed handyman will have no insurance or maybe just liability.  As a company you can pay workers compensations premiums on the workers you hire.

Maybe start marketing an see what happens.  If an easy deal comes along start with that.  If a harder one comes along sell it to me or partner with someone.

Patrick T. · Answer

Hi Josiah,

John is correct.  Most building departments have a website and good brochures that explain the process.  And a lot of times there is someone tasked with fielding questions and explaining things.

The reality is that a lot of times owners and even licensed conctracotrs don't pull permits.  Before making that decision you should talk to those who will be calling on you if something really goes bad (after the first responders have left).  So after you ask the building department when a permit is necessary, then ask your insurance agent.  They will give you honest answers, based on experience.

A lot of general contractors are able to handle individual trades and smaller projects as well as oversee big jobs (get referrals and interview a few).  Various jurisdictions have different limits on what trades a GC can handle.  In my area you're supposed to be a licensed electrician and pull a permit even for changing out plugs and switches.  I heard of an inspector dropping in un-invited when he saw a dishwasher being delivered.

So your decision to, or not to, use licenses and pull permits should be an educated one.

If you have a general contractor on a job you probably shouldn't be dealing directly with the subs (electric, plumbing, etc.) the GC is responsible for directing them and making sure they are properly licensed and insured.  If you just have one trade on the job, i.e. electric only, and no GC then you deal with him.

I know a lot of people do it differently, but ask your insurance agent what licenses and insurance certificates you need from contractors and for your business.  It can be very specific for you.

Historically owners have been able to act as their own GC and pull permits, with the limits mentioned above.  But building departments are putting the breaks on that for investor/owners and requiring them to get a GC license if they work on more than one building.

William Hochstedler · Answer

Just to clarify, both of the times we've run into issues with UDOPL were when we had permits.  They were both licensing issues.  My fine was because I was pulling wire--my electrician was two weeks out--on one of my properties.  Another instance, a temp laborer told DOPL he was working for my company, not the licensed roofer (we got that sorted out).  DOPL probably does spot inspections on permitted job sites to make sure all workers on the site are properly licensed and have workman's comp.  Also, be aware that the state is running around spot checking compliance with the new EPA lead-based paint certification laws (this one is a doozy).

Our local building department is much easier to work with as their primary goal is to ensure that renovation projects are done correctly.  They are much more interested in code and safety.  They are less concerned with who is doing what work (unless it's a botch job on the electrical service, for example).  In my experience, the worst that's happened from working without a permit is getting a stop work order issued until a permit is in place.

Building inspectors can be your ally in a rehab and should be treated that way.  They have seen many head-scratchers and can provide very helpful solutions.  For us, they have signed off on a too steep staircase that we thought we would have to reroute, and suggested a shortcut to ripping out a whole section of plumbing, leaving most of the existing in place.  Moreover, if you're flipping, you have this documentation to show it was on the up-and-up.

Ask around in your community (or here) which inspectors are the easiest to work with and try to get them to your site.  We've found that our interests often converge in getting things done correctly the first time; and that a good inspector understands financial constraints and wants to help create a safe, habitable project.  One of my colleagues even gets an inspector out as part of his due diligence.

Hope this helps,

Wm

Karen Margrave · Answer

@Josiah Halverson  You should be able to go on your state contrators licensing site and find out who is required to be licensed. Usually it's based on a dollar amount. You should also be able to verify a license, bond, and workmans comp on the site too, at least in California you can. Also, get verification of any other liability insurance.

When you are getting bids, be sure to ask for the contractors license number, and then, VERYIFY it, don't just take their word for it. In California we have pocket cards that show our licensing info, if your state does, ask to see it, and ask to see I.D. such as a driver's license etc., to make sure the card belongs to the person you are talking to. You'd be surprised how many scams there are, or people that let friends borrow their license to work under, etc.

Ask for references, and again, check them. Ask if the work was done on time and within the budget, what condition did they leave the house in, etc., would they use them again?

In some places the homeowner can pull permits in certain circumstances, ask your local building department as @J  Scott mentioned.

Gary Parker · Answer

@William Hochstedler made some very good points.    I am actually glad UDOPL is starting to fine people for improper permit.   Since I have chosen to pull permits, it is in my best interest if more and more rehabbers pull permits.  It more levels the playing field when negotiating purchase price.

A licensed contractor can also do or inspect work such as framing and Sheetrock that less expensive labor can do.   Somewhat a grey area in Salt Lake County.  OK it is black and white.  Technically for a laborer to frame a wall the licensed contractor must be on premises while framing takes place at least that is what I was told.

Ahmed Porter · Answer

Scott is right if you are going to be building in a area it is a good idea to take a trip down town to find out what  permits are need and not need for the area you are in. I would go as far as to get a name and something in writing . A lot of us can contest even down at the permit office you can get the wrong information.Yes a faucet a permit is need reason I have seen a job in my area were someone was changing a faucet in a high rise and the value did not hold and water ran for two hours into they were able to shut the building down.So all the floors under them got damage.Permits are to help you out because they are just the construction minim standard they come out to look at. If you have a half way good trades person there work will exceed the inspection.YOu can also pay to have someone pull all the permits for you  just like any other business phase things you  are not that good at pay a pro to do it for you.Insurance is a must can not say it enough when you are making money you want to expose your self less as possible with liability.You are doing the job to make a profit but you have to invest in the what if factor also. Good luck  to you .

J Scott · Answer

As others have alluded to, the answers to many of these questions will be location specific.  In some areas, EVERY contractor must be licensed and operating without a license (even just to do something as simple as painting or putting in carpet) can result in fines or even jail time.  In other areas, you only need to be licensed if you're doing plumbing, electrical, HVAC or other specialty work -- everyone else is free to operate legally without a license.  Licensing is generally defined at the state level, but local jurisdictions may overlay additional/different licensing rules in their area.

Likewise, permit requirements are going to vary.   In some places, I could remodel an entire house without needing any permits; in other places, if I wanted to replace a dishwasher, I would need a permit and inspections.  This is generally up to the local jurisdiction -- you can check with your local building department to find out what permitting is required in that area.

As for your handyman scenario, it depends where you live.  It MIGHT be perfectly reasonable for you -- as the owner -- to hire a handyman to do all the stuff that doesn't require a permit and then for you to hire a plumber/electrician/HVAC guy to pull permits on those areas and do that work.  Though these specialty trades would never officially work for the handyman (since he's not a licensed contractor/GC), but in some places he could ask them to come in, and they could technically be working and pulling permits on your behalf.  This is how I would do things in many cities around Atlanta, and it would be perfectly legal as long as the handyman wasn't doing anything that required a permit and as long as the plumber/electrician/HVAC were pulling permits for their pieces.

Then again, that may be very illegal.  It may be that the handyman needs to be licensed, it may be that the handyman needs permits for things you want to do but can't pull permits without be licensed, and it may be that plumbers/electricians/HVAC can't pull permits under your name -- even though you're the owner -- and would need to work under a GC.  This is how it would be in Maryland and parts of Wisconsin where I do some work.

As you can see, there's no right or wrong answer to your question -- it's going to depend on your state and local regulations.  I do work in multiple states, and have to run my crews/projects differently in each state based on the laws and regulations; in fact, I have to run my projects differently in each county/town in many cases, as the rules change change from one town to another.

Lastly, regardless of what the state/local rules are, consider that you may want to ensure that every contractor you hire has liability and/or workers comp insurance.  Liability insurance will cover many things the contractor may accidentally do to cause damage to property or people in the course of his work; workers comp will cover personal injury of the worker and/or his employees/sub-contractors.  If you hire contractors without insurance, you're taking on at least some liability -- you should understand the trade-offs and make informed decisions.

Steve Babiak · Answer

The local building dept or code enforcement dept should be able to tell you this answer.  In some localities, a licensed plumber with permits would be required to change a faucet, whereas in other localities they don't give a hoot who does it.

John Moore · Answer

I would go to the Township Building Department and ask them most of the questions you posted.  Areas vary by a significant degree, some require the tradesmen/woman need to be licensed while others don't.  Some areas the homeowner is exempt from the license requirement if he is doing the work.  I would start off right and seek the input of the Township as you don't want the Inspectors on your case.  Most departments are more than cooperative and you will avoid future problems.  The insurance you should require is General Liability and Workmans Compensation or Copy of Exemption form.  This is not legal advice just food for thought.

What license and insurance documentation do I need to verify when hiring a tradesman?

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